KeyBanc Appreciates Whirlpool's Prospects But Moves To The Sideline

Whirlpool Corporation (NYSE: WHR) reported fourth-quarter results Thursday that included an earnings beat but a revenue miss. While the results showed some momentum in the business, at least one analyst said now is the time for investors to move to the sidelines.

The Analyst

KeyBanc Capital Markets' Kenneth Zener downgraded Whirlpool's stock from Overweight to Sector Weight with no assigned price target. 

The Thesis

Whirlpool's Q4 earnings showed flat North American sales and an EBIT decline of 11.4 percent, Zener said in the downgrade note.(See the analyst's track record here.)

But the company did guide for 12-percent EBIT growth, a figure which doesn't include any benefit from President Donald Trump's new tariff on washing machines and is in-line with management's comments of "significant progress in global price/mix and our fixed cost reduction initiatives," according to KeyBanc.

Sales rose 1.5 percent in Europe; Latin American sales rose 3 percent; and Asian sales fell 5 percent.

Overall, Whirlpool does offer long-term investors an opportunity to benefit from "material" margin upside, as the company is guiding to grow its EBIT rate from 7.5 percent in fiscal 2018 to 10 percent in 2020, the analyst said. But the guidance is several years out, and in the near-term any catalysts are "largely priced" into the stock's current valuation, Zener said.

Coupled with several uncertain factors, including cost inflation, the stock offers a balanced risk-reward profile, he said. 

Price Action

Shares of Whirlpool were trading lower by around 0.8 percent early Friday morning.

Related Links:

The 10 Most Undervalued Stocks Kicking Off Earnings Season

A Peek Into The Markets: U.S. Stock Futures Climb Ahead Of GDP Report 

Photo courtesy of Whirlpool.